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Local Banks and flood risk: the case of Germany

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Abstract

This paper uses a simulation model to evaluate the effects of river flooding events occurring within Germany on regional' banks. Under a 1.5 degrees Celcius increase in temperature, the impact is overall rather small, even accounting for the devaluation of loans exposed to floods. However, under a 3 degrees Celcius increase, bank losses can reach 1% of total assets. We show that the implementation of adaptation solutions would be successful in keeping risks at the current level.

Suggested Citation

  • Pagano, Andrea & Bellia, Mario & Di Girolamo, Francesca & Papadopoulos, Georgios, 2023. "Local Banks and flood risk: the case of Germany," JRC Working Papers in Economics and Finance 2023-13, Joint Research Centre, European Commission.
    • Handle: RePEc:jrs:wpaper:202313
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC136411
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    More about this item

    Keywords

    Physical risk; river flood events; dynamic balance sheet; banking crisis;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • G2 - Financial Economics - - Financial Institutions and Services
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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